On this day 11 years ago, an anonymous writer under the pseudonym “Satoshi Nakamoto” published a white paper. The document described a decentralized cryptocurrency, with transactions stored on a digital ledger in a “blockchain,” that would enable people to exchange funds over the internet without needing a financial institution.
Fast forward 11 years and the results have been a mixed bag. Bitcoin has a market cap of $167 billion, down from an all-time high of over $300 billion in December 2017. It’s sparked a widespread industry of “altcoins,” and even big names like Facebook have started exploring an asset-backed Libra cryptocurrency. But mainstream adoption remains limited, its price remains volatile, and environmental concerns swirl around the coin’s energy usage.
“After 11 years, it’s safe to say that bitcoin is not a flash in the pan,” Clement Thibault, an analyst at financial markets platform Investing.com, tells Inverse. “I remain cautiously optimistic about the future of bitcoin, but it may be decades before it ceases to be mainly a speculative asset.”
Bitcoin: the promise of a bank-free future
The bitcoin white paper’s introduction hints at a future that would cut major financial institutions from the equation, giving internet users a way to directly exchange value with each other:
What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers. In this paper, we propose a solution to the double-spending problem using a peer-to-peer distributed timestamp server to generate computational proof of the chronological order of transactions.
The first real-world item purchased with bitcoin is believed to have been a pizza. Programmer Laszlo Hanyecz spent 10,000 bitcoins to purchase $25 worth of pizza from a user of the BitcoinTalk forums. At the time those bitcoins would have been worth $41, so Hanyecz made a notable loss on his purchase. May 22 is now celebrated in the community as bitcoin pizza day, and wallet manufacturer Ledger has even produced a limited-edition pizza wallet for storing bitcoins.
A Twitter account, Bitcoin Pizza Tracker, lists the price of those bitcoins every day. At the time of writing, they are currently worth $91 million.
In 2017, a surging price led to increased mainstream interest. The price moved from less than $1,000 in January to reach around the $20,000 mark by December.
But bitcoin remains a relative obscurity. It’s rarely offered as a payment method in the United States, and even in places that do offer support like BrewDog in the United Kingdom, the user experience can be frustrating.
That doesn’t mean bitcoin’s influence is over, though. After dropping to a price of less than $4,000 in December 2018, bitcoin peaked to $13,000 in July 2019. During this surge, Facebook announced a new push into cryptocurrency with the Libra consortium. This collection of firms would offer an asset-backed cryptocurrency, governed by an association, that enables those simplified transactions but aims to avoid some of the issues with bitcoin.
Bitcoin: a bright future?
Price-wise, nobody can be certain of bitcoin’s future performance. On the day of bitcoin’s anniversary, popular analysis Twitter account “crypto_birb” posted a suggestion that the price could rise to new all-time highs. But Kenneth Rogoff, a professor of economics and public policy at Harvard University, told Investopedia in June that the long-term value is “more likely to be $100 than $100,000.”
Focusing on the price could ignore some of its long-term effects.
“Long term, the price, tech, and social influence will align together and be correlated,” Thibault says. “Bitcoin is still a speculative asset but it will either end up as a forgotten temporary mania or as a force to be reckoned with. However, the longer bitcoin exists, the stronger it gets from a social and tech perspective, the more its influence grows, and the more battle-tested blockchain becomes.”
Author Daniel Jeffries made a similar declaration in a September 2019 HackerNoon story. He predicted a number of potentially unforeseeable improvements in user experience, the possible rise of a number of new projects, and a 50/50 chance for bitcoin’s long-term survival: “A coin with well designed, widespread, build-in governance will have a massive advantage over bitcoin and could easily replace it, as it makes upgrades seamless and smooth.”
But even with these problems solved, the question could remain whether cryptocurrency could fill a clear gap in the market to prove useful to a mainstream audience. Antoine Martin, an economist in the New York Fed’s Money and Payment Studies function, explained to the World Economic Forum in February 2018 why that might not be so clear:
Bitcoin and other cryptocurrencies are trying to improve scalability and convenience so perhaps in the future one of these cryptocurrencies could realistically compete with current payment methods. But, fundamentally, we wonder whether a payment method designed to function where trust in institutions is completely absent can ever be as convenient as one where trust is required, but also already exists.
Bitcoin may have grown a year older, but its future remains as unclear as ever.
The author of this story has a stake in bitcoin and Ethereum.